Friday, February 27, 2009

How Bad Is the U.S. Economy?

There is a campaign afoot by a conservative minority to downplay the state of the U.S. economy. The U.S. economy not so bad? It’s a tough sell, but this fragment is nevertheless trying to sell it.

And since a new president is now talking about our economy frankly, i.e., that the economy is indeed in dire straits, this conservative minority is not only downplaying the seriousness of our economic situation but is now denigrating the new president in order to do so.

Look at Bradley Schiller’s outlandish Feb. 13, 2009 Wall Street Journal column as a case in point. The column’s title? “Obama’s Rhetoric Is the Real ‘Catastrophe.’

Schiller begins with the ludicrous statement that “Obama has turned fearmongering into an art form” because Obama mentions today’s economic crisis and “Great Depression” in the same sentence. Forget the rhetoric of other administrations in recent years—“Axis of Evil,” “Saddam is training al-Qaeda,” “Iraq is a nuclear threat”1—because “Great Depression” is worse . . . but that’s a different column. And forget that economists, CEOs, and regular Americans across the board compared the crisis to the Great Depression long before Obama.2

Besides peddling ridiculous claims, Schiller’s main point seems to be that unemployment is the criterion for a declining economy, and since the unemployment rate in the 1930s peaked at about 25% compared to today’s 7.6% and 1982’s 10.8%, 2009 doesn’t compare to 1930. . . .

What Schiller doesn't mention is today’s mortgage crisis, the financial system collapse (about one-fourth of our GDP) and multibillion-dollar bailout, the $10 trillion national debt,3, 4 the decline of the U.S. dollar against the Euro, the high price of oil as the dollar declines, the war in Iraq and the newly expanded war in Afghanistan.

As noted above, Schiller likes to quote the year 1982, a year which he thinks was a little bit worse than today. For fun, let’s give him that:

OK, let’s say today’s crisis is nearly tied with the 1981–82 crisis for second-worst-economy-ever after the Great Depression. Even if we concede that, so what? What has Schiller proven? That the economy is very close to being as bad as it was 30 years ago? And that the economy is approaching with no signs of letting up its level during the Depression nearly 80 years ago? Therefore, there's nothing to worry about and no need to make any changes to the current system?

Are our standards for progress so low?

So how bad is the U.S. economy? The important thing is that it’s bad enough that something needs to be done about it.

Be on the lookout for similar claims from the conservative minority that Obama is mongering economic fear. What's the purpose of Schiller and Co.'s bombastic rhetoric? Well, besides simply trying to garner attention (i.e. higher ratings which lead to fatter paychecks) for themselves and endearing themselves further to the Republicans who perhaps give them their paychecks, one purpose is to try to counter Obama's economic recovery plans, plans that might curb the kind of reckless trading and borrowing that has concentrated U.S. wealth and that has devastated the U.S. economy, bringing it close to, yes, another Great Depression.

But why, you may ask, would they want to do that? Do they want our economy to continue to suffer? I'll offer some answers to those questions in my next post. Stay tuned.

[1] For more rhetoric from the last decade or so that aimed to monger fear, see The Center for American Progress, “Claims and Facts: Rhetoric, Reality and the War in Iraq.”

[2] No citation necessary. But for fun, see economist Mark Gertler quoted in “Worst Crisis Since ’30s, With No End Yet in Sight,” The Wall Street Journal, Sept. 18, 2008. Also see economist Paul Krugman, “Fighting Off Depression,” The New York Times, Jan. 4, 2009.

[3] See our Jan. 13, 2009 post “Tired of Paying to Continue Being Poor” for info on the 10 trillion national debt.

[4] In the U.S. “[b]y 2007 total indebtedness was three times the size of the gross domestic product, a ratio that surpassed the record set in the years of the Great Depression” (Barry Gewen, “What Ails the American Economy? Everything, and There’s Worse to Come.” Rev. of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, by Kevin Phillips. The New York Times, Apr. 21, 2008).

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Gledwood said...

Something I read many years ago pointed out that this huge national debt and outrageous levels of personal debt were going to be the downfall of the American Economy ... sadly it seems to be coming true.

I'm in London and we're having very similar problems to ones you are...
For many years we have been richer than other Europeans. Being a nation of home-owners has meant we've had money to invest in second homes on the Continent, where the locals, who may have worked in similar jobs for all their lives, didn't have those opportunities, due entirely to a different economic system (no I don't mean socialist, just more TOWARDS socialism...)

A downside to the Anglo-American way of doing things has been that while continental Europeans will pay for goods in cash, us more "sophisticated" folks from across various bodies of water think "no I'll stick it on the card and pay it off"... as if THAT ever happens... and so it has gone on and on

I mean even our supposedly "prudent" Prime Minister and former chancellor/finaince minister in the best times we had through the 90s and 00s was borrowing more than £20 billion a year because he could not balance the national books. Now we're in trouble he says tax incomes will go down he'll have to borrow even more. Britain's national debt is threatening to QUADROUPLE from what it was (about £500 billion, if I remember right) up to two TRILLION pounds which is just ridiculous. I don't think our govt.'s ever going to be able to repay that...

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